A brighter, more female future for entrepreneurs
The past 18 months have been monumentally important for women around the world. The women’s suffrage movement turned 100, #metoo continues to transform gender equality and figures on the gender pay gap revealed that many women are still being short-changed in the workplace. These forces are driving great advancements for women, in their personal lives and also at work, and women’s entrepreneurship is surging in the UK.
Entrepreneurship is moving in the right direction
More and more start-ups are taking off, but importantly, this growth is rising faster amongst women than men. According to the Global Enterprise Monitor’s (GEM) latest report, the female to male entrepreneurs ratio is up by 6% from a year ago.
Based on GEM’s findings, Birmingham’s Aston University calculated that the proportion of female early-stage entrepreneurs in the three years to 2016 increased by almost half from the same period ten years earlier. What’s the attraction? According to the GEM survey, the most important reason for the vast majority of women starting their own business was ‘to be free to make my own decision’, and by far the second biggest factor was that it enabled them ‘to have ‘good relationships with others.’
Similar results were found in University of New Hampshire research on women involved in angel investing in the US. This was fairly static at roughly 15% of the total before spiking to 19% in 2014 and carrying on that surge to 28% by 2017.
The numbers are moving in the right direction, but work remains to be done – women are still roughly half as likely to become entrepreneurs as men (6% versus 10%). And the UK is trailing other developed economies; Canada has the highest rate of female early-stage entrepreneurs at 15%, whereas the figure for the UK is just 5%.
Dr Karen Bonner, senior researcher at Aston Business School, pointed to “different societal expectations, with women still taking on the bulk of unpaid caring roles and entrepreneurship still stereotyped as a ‘male’ career choice in our wider culture.”
Smashing through the barriers to entry
Barriers to entry for new business are coming down. Domain names start at about £10 and websites can be built within hours. No expensive offices are necessary, with some businesses existing entirely online.
Early-stage businesses have also been big beneficiaries of web and app-based services, which have high productivity and are a lot cheaper to run than their land-based counterparts, as the gradual decline of the high street illustrates.
The continued rise of social media has made marketing and customer engagement much easier for small businesses. Platforms like Facebook, Twitter and Instagram have enabled cheaper and more immediate marketing channels, which can be more targeted and have a higher impact.
An increase in self-employment and consultancy means that startups don’t have to pay for teams of staff from day one. New businesses can build knowledge gradually using short-term contracts until cash flow is good enough to start building a permanent team of experts. Technological advancements make flexible working easier and staff can work longer hours but on their own terms, typically increasing productivity.
New ways to raise cash
The financial crisis of 2008 lead to the tightening of purse strings at banks around the world. Banks wanted to take less risk, so an important source of capital for entrepreneurs was less available. A report by Florida Atlantic University found that small business loans decreased 14% from 2008 to 2016, while lending to large firms increased by 49% over the same period.
The same report found that women received just 16% of all conventional small business loans in 2016, and only 2% of venture capital (VC) funding. This means that female entrepreneurs often rely on alternative sources of financing.
Fortunately, the rise of crowdfunding has coincided with banks reducing their small business lending. Kickstarter was established in 2009 and 412,494 projects have since been launched on the site. The total crowdfunding volume worldwide is $16.2bn, up from $2.7bn in 2012. The growth of this industry has enabled many female entrepreneurs to start a business, at a time when banks are less willing to lend.
There has been huge growth in support networks for female entrepreneurs over the past few years. Women in business are being increasingly well represented and these networks are valuable to entrepreneurs. A quick google search reveals dozens of networks and events for female entrepreneurs, and that’s just in the UK. Not only do these networks facilitate introductions and the sharing of experiences, a lot of them also offer structured education around business management and growth. There are also several VCs which specifically target female entrepreneurs.
The UK government is also supporting female entrepreneurs and established its own network in 2012; the Women’s Business Council. The Council helped to drive important legislative changes such as Shared Parental Leave and the right to flexible working. It has also promoted best practice within companies to tackle the gender pay gap and helped to develop the forthcoming reporting regulations.
Confidence is growing
These changes and trends all support the growth of female entrepreneurship around the world and women feel optimistic about the future. This is borne out in Hiscox’s 2017 DNA of an Entrepreneur report, which found that 61% of female small business owners have a positive view on the current economic climate and 40% feel better about their personal financial situation than they did one year ago. Overall, 61% of women believe their wages will equal or surpass men’s pay in two decades time.
Their outlook is positive, their barriers to entry lower and support networks greater. The future holds great promise for female entrepreneurship around the world.
If you’d like to find out more about entrepreneur networks that Rathbones can put you in touch with, please contact Rebecca Tunstall.